Opec committee proposes nine more months of oil-cuts

Oil prices remained steady yesterday at the worldwide market trading above $50/barrel, as the traders await formal declaration of the production cut extension today.

The uncertainty over what happens next drained on the momentum for a rally in crude oil prices that began last week when Russian Federation and Saudi Arabia proposed extending the multilateral effort into early 2018, instead of the six months outlined in the original arrangement. "This. made us change our view", he said.

But the price rise has spurred growth in the USA shale industry, which is not participating in the output deal, thus slowing the market's rebalancing with global stocks still near record highs.

Kuwaiti Oil Minister Issam Almarzooq, however, said Tuesday some countries are not in favour of a nine-month extension, but there's a preliminary agreement on a six-month deal that will be reviewed in November. The IEA calculates the cartel earned nearly $75 million extra a day in the first quarter of this year than in the last quarter of 2016, despite collectively cutting output to 31.9 MMbpd from 33.3 million.

"Now that OPEC is headed down this path, it must figure out a way to gradually step away from deliberate supply management when it believes the fundamentals merit their incremental oil", they said". A more substantial cut was unlikely, one Opec delegate said, "unless Saudi Arabia initiates it with the biggest contribution and is supported by other Gulf members".

Both benchmarks have gained more than 10 per cent from their May lows below US$50 a barrel, rebounding on a consensus that Opec and other producers will maintain strict limits on production in an attempt to drain persistent global oversupply.

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"Charitably, one would argue that things have not quite worked out yet", said Jan Stuart, chief energy economist at Credit Suisse Group AG in NY.

Crude has climbed as Saudi Arabia and non-OPEC member Russian Federation rally support for an extension into 2018 of the output-cut deal by the Organization of Petroleum Exporting Countries and its allies.

The price of oil rose in the world markets. The talks in Austria will be closely followed elsewhere as they can affect everything from the share price of Exxon Mobil Corp.to the Brazilian real and Nigerian sovereign bonds.

Saudi Energy Minister Khalid al-Falih noted a "trend" to extend. "We will support the majority, probably the nine months".

However, it is widely expected that the deal will be extended, with the only real questions being for how long and whether cuts will be more severe. But the recovery has brought many back to life, and United States output is nearing record levels.

US crude was flat at $51.48 a barrel, after near-month futures have climbed for the past five sessions, as the Energy Information Administration showed a bigger-than-expected drop in oil inventories last week while production rebounded.

  • Zachary Reyes